The UK Feed In Tariff is the incentive scheme for Domestic and Commercial property owners to generate renewable electricity. You get paid to produce electricity from renewable energy technologies – regardless of whether you use that electricity or not!
For the Latest News on the Feed in Tariff rates and changes to the system please view here
What Is the UK Feed-In-Tariff?
In April 2010 the UK Government introduced Feed In Tariffs to encourage the installation of renewable electricity generating technology in all types of buildings across the UK. Under this scheme you are paid a fixed rate for every Kilo Watt Hour (kWh) of renewable electricity that you generate, regardless of whether you use the electricity yourself or not. For electricity that you do not use you will be paid an additional rate for every KWh that you “Feed back” into the national grid, whilst you will also save money on your electricity bills as you will purchase less electricity from your supplier.
Systems covered include most forms of renewable electricity generation, including Solar PV, Hydro Electric power and Wind power, up to an output size of 5MW. Systems over 5MW are covered under the Renewables Obligation (5MW is enough electricity for a large factory or a total village!).
The FIT system is open to everyone including households, businesses, schools, hospitals, local councils, and community projects – in fact any renewable electricity project under 5MW.
Note that the FIT scheme is for renewable ELECTRICITY generating technologies. Therefore, technologies such as solar heat and insulation are not included in the scheme. There is a separate scheme for these kinds of renewables called Renewable Heat Incentive (RHI).
For a Renewable electricity generating system to be eligible for a FIT payment, they must be installed by an MCS (Microgeneration Certification Scheme) accredited company. Once installed, you will receive a MCS certificate that enables you to apply for FIT payments.
The FIT has 2 payment Tariffs:
- Generation Tariff
a fixed payment by your electricity supplier for each KWh of electricity you generate, regardless of whether you use it or not. This payment is fixed for the first year and then linked to the RPI (retail price index) which changes every April. Ofgem will regularly review the tariff rates, every quarter which ar then published on their website. The length of the scheme is guaranteed for 20 years for Solar PV and 20 years for Wind technologies.
- Export Tariff
this is a payment that has a floor price of 4.5p/kWh from your electricity supplier for each unit of renewable electricity that you generate but do not use and thereby “Feed Back” into the national grid. The amount that you feed-back into the grid will eventually be measured by Smart Meters, which will be installed in every house in the future under a Government scheme. However, until the use of Smart Meters is more widespread, the Government has set out that 50% of total electricity generation will be “assumed” to have been exported. The 4.5p/kWh is also a “floor” price, and renewable energy generators (i.e. participants in the FIT scheme) can negotiate higher Export Tariffs with their energy supplier.
The Export Tariff is set with a floor price of 4.5p/kWh. However, this is a Minimum price. Higher prices can be negotiated with energy suppliers, and this will obviously be dependent on the market rate at any time during the 20 years of the scheme. Should the market rate increase over the years then it will be likely that energy suppliers will negotiate higher “Export” rates also. Note that to avoid the need for additional Export Meters to be installed before a roll out of Smart Meters, the Government allows renewable energy generators to assume an export rate of 50%. Those that think they export more can install export meters/smart meters of their own accord. Others can just take this 50% export rate until Smart Meters are rolled out across the country.
For homeowners, the FIT income is Income tax FREE.
For companies, they must pay tax, but can accrue depreciation tax benefits on the systems installed.